Struggling Spain, reluctant to call for a debt bailout, faces slower growth
and a much bigger public deficit than its government initially expected,
according to reports.

This year's public deficit - the shortfall between government spending and revenues - will come in at 8.0pc of Gross Domestic Product, well above the target of 6.3pc agreed with Brussels when Spain was given an extra year to put its strained finances in order.

The deficit next year will be 6pc, compared with Madrid's estimate of 4.5pc, a European source told AFP a day before the European Commission unveils its official forecasts for the bloc.

In 2014, when the deficit was supposed to come in at 2.8pc - under the EU ceiling of 3pc - it will be still at 5.8pc, the source said, leaving Spain in dangerous waters.

"This means that Spain finds itself with a real problem - it either gets another extension [to the timetable] agreed in June" or it will have to take additional austerity measures, the source said.

Total debt as a percentage of GDP is expected to be slightly better than government forecasts, at 83.7pc in 2012 compared with 85.3pc, and 89.5pc next year rather than 90.5pc, but again it is well over the 60pc EU limit.